Consumers growing weary of the nation’s backlogged court system are discovering other outlets to settle their legal disputes.
Hastened by calls for speedier trials and lower legal fees, public and private arbitration and mediation services have sprouted up across the country in the past decade. Their procedures are less formal and confrontational, and the absence of lawyers is not uncommon.
Some experts believe the services have injected a spirit of creativity and flexibility into a legal system that has grown increasingly rigid over the past 20 years.
Mediations are not legal hearings, yet a signed mediation agreement almost always holds up in court. A third party – not a judge – simply helps guide the two parties toward a mutual agreement. The sessions usually last no more than a few afternoons, and often cost less than $ 200.
Perhaps best of all: Some 85 percent of mediations end with agreement, according to the National Arbitration Forum (NAF).
Arbitration hearings take longer to settle – from a week to a few months, or even a year. They are normally run by a former judge or attorney whose decision is binding. Legal fees are higher, and both sides often call witnesses. Yet the cost is usually about one-fourth that of going to trial.
Both methods appear to be drawing more Americans away from the courts.
The caseload of the American Arbitration Association – the largest US arbitrator – has more than tripled in the past six years, jumping from about 62,000 case filings in 1995 to 198,000 last year. (Much of the growth resulted from corporations settling labor disputes in arbitration.)
The number of community centers in the US offering mediation grew rapidly in the 1990s, to a total of about 600. The popularity of both, experts argue, is partly rooted in a backlash against America’s love affair with litigation, which has flourished since the 1970s.
In addition, most civil courts are now funneling cases to the alternative services in an attempt to ease the courts’ mounting backlog of cases.
Evidence shows participants are usually satisfied with both processes.
A 1994 study by Northern Illinois University in DeKalb, found that 98 percent of plaintiffs that participated in a state-run mediation program believed it was a much faster route to settlement. And their lawyers said clients likely saved an average of $ 10,000 in legal fees.
Many advocates of dispute resolution point out that the alternative formats – particularly mediation – offer both parties a valuable opportunity to reevaluate the dispute before a high-stakes court hearing escalates hard feelings.
In Douglas County, Ore. – a rural area with a timber economy just north of the California border – Cynthia Moore often deals with consumer complaints she believes do not belong in court.
“Often it isn’t a legal issue,” says Ms. Moore, head of the county’s mediation center. “People are mad about the way they were treated. What they’ll do is grab hold of a legal issue to get attention.”
Amy Cleary, who runs the state’s Clackmas County Dispute Resolution Center in metropolitan Portland, says the majority of her sessions with consumers concern disputes over used-car purchases, mortgages, and phone bills.
In most cases, merchants are eager to participate in mediation. “The incentive to them is to [avoid] a lengthy court battle and to maintain a good reputation in their community,” says Ms. Cleary.
Another bonus for businesses: The arrangements aren’t made public. “It makes the discussion more frank … and allows for brainstorming…,” says Cleary.
Yet the informality and privacy of mediation and arbitration don’t always work to the consumer’s advantage. Corporations and smaller businesses, consumer groups point out, are using the system to shield themselves from litigation. A growing number of consumers who agree to settle disputes through arbitration unwittingly give up their right to sue. Hundreds of businesses have begun inserting requirements into customer contracts that disputes be settled in binding arbitration, rather than in a courtroom.
The move helps companies avoid the possibility of paying a large settlement and huge legal fees, as well as facing the exposure that comes from a judgment entered onto the public record.
Mandatory arbitration clauses are commonly placed in contracts with credit-card companies, insurers, mortgage lenders, and real estate agencies, says Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif.
“Clearly, in the past decade there has been a dramatic increase in the industries asking individuals to waive their rights,” says Mr. Court. “A commercial transaction isn’t limited to the exchange of goods, but also the exchange of rights.”
Court says the provisions often appear in fine print. He recommends that consumers try to negotiate them out of the contract.
Teddi Alves, from Huntington Beach, Calif., has opposed arbitration since 1994, when she was injured by an uninsured driver. State law, she says, required her case to be handled in binding arbitration.
“You don’t have due process,” says Ms. Alves. “You sit down in a room and they all nod at each other and it’s over.”
The role of lawyers is hotly debated. Professional mediator and lawyer Doris Tennant is a pioneer in the collaborative- hearing movement, which requires the two sides agree to dump their lawyers if one side opts for a trial.
“It’s a very good alternative to the posturing and financial and emotional cost in litigating,” says Ms. Tenant.
Yet a number of long-time advocates worry that the removal of lawyers from the legal process leaves consumers vulnerable to corporate manipulation.
“There’s a school of thought that says, ‘… anything to get out of court and away from lawyers is good,’ ” says Daniel Traver, a consumer litigation lawyer in Port Huron, Mich. “[But] you have to wonder who benefits from removing from the system someone who has spent their life resolving these problems.”
A tough last step: collecting on judgments
After winning a lawsuit, people often call the office of Indianapolis attorney Craig Wellnitz, reeling from disbelief.
“They [think] that since they’ve been to court and won their case, they can just wait for the money to pour in,” says Mr. Wellnitz. “The courts are not collection agencies, and people don’t understand that.”
As a debt-collection lawyer, Wellnitz helps hundreds of consumers and companies retrieve money judgments: payments awarded in successful lawsuits.
But many of his clients, he says, are initially unaware that plaintiffs themselves, not the courts, are responsible for tracking down the money. It’s one of the reasons that a high percentage of awards go completely uncollected.
Wellnitz estimates half of all the judgments in Indiana are never retrieved. Some lawyers and consumer advocates say the trend is similar nationwide.
One explanation, experts say, is that many people simply lose the will to continue filing paperwork and paying an attorney after what might have been a long court hearing.
Evidence also suggests that plaintiffs who represent themselves in civil cases, often in small-claims court, also struggle to collect judgments without legal guidance.
Roger Transgrude cites the sophistication of debtors themselves. The law professor at George Washington University, in Washington, says those with few assets frequently change jobs and residences to avoid detection.
Debtors with considerable wealth often hide behind the law.
“People transfer funds to trust accounts or to family members,” says Mr. Transgrude. “Some states make relatives immune to a levy.”
But there are ways for consumers to ease the detective work. Wellnitz recommends that plaintiffs obtain as much information about the defendants as possible (such as their home address and Social Security number), before the case is decided. The most crucial data: the debtor’s employer and bank-account number.
Such information helps plaintiffs pursue two options. Most attempt to garnish wages or seize funds by contacting the defendant’s employer or bank.
The alternative method – execution of property – allows the winner to gain control of the debtor’s assets, including real estate. State laws vary in this area, however. Some exempt certain homes. And even if the plaintiff is able to seize property, the payoff can be minimal.
“People should ask ‘Do I want to pay for the cost of a sheriff’s sale to dispose of property to collect the debt?’ ” asks Robert Blume, a law professor at Boston College.
People resigned to tracking down debtors, however, might hire a “skip tracer,” Mr. Wellnitz says. These investigators charge about $ 60 to track down debtors’ employers and bank accounts.
Wellnitz, like other collection lawyers, often charges about a third of the total value of collected debt.